What has changed and what has stayed the same?
The Tax Cuts and Jobs Act of 2017 (TCJA) eliminated the deduction for entertainment and businesses could only deduct 50% of meals as a business expense.
Under Sec 210 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, it states that for 2021 & 2022, taxpayers will be able to deduct 100% of business meal expenses where the food and beverages are provided by a restaurant, provided:
· The expense is an ordinary and necessary expense paid or incurred during the taxable year in carrying on any trade or business.
· The expense is not lavish or extravagant under the circumstances.
· The taxpayer, or an employee of the taxpayer, is present at the furnishing of the food or beverages.
· The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact. Final regulation 1.274-12(b)(3) defines “business associate” as a “person with whom the taxpayer could reasonably expect to engage or deal in the active conduct of the taxpayer's trade or business such as the taxpayer's customer, client, supplier, employee, agent, partner, or professional adviser, whether established or prospective.
No change has been granted for the deduction of entertainment expenses used in business marketing or operations though, so businesses can at least enjoy their business lunches for the next two years.